Abstract

Hitherto very few studies on the inequality-finance(investment) nexus have focused on
the African continent owing to lack of relevant data. This paper integrates previously missing
investment and financial components in the assessment of how finance affects pro-poor
investment channels. Findings reveal, but for the case of foreign investment, financial
development dynamics of depth, efficiency, activity and size have an equalizing effect on
income distribution through private, public and domestic investment channels. As a policy
implication investment-targeted financial reforms that aim to curb poverty should take account of
the disequalizing income-effect of foreign investment in undeveloped countries.

Ayyagari, M., Demirgüç-Kunt, & A., Maksimovic, V.,(2006). “How important are financing constraints? The role of finance in the business environment”, Working Paper No. 3820. The World Bank Policy Research, Washington D.C.